Revenue procedure authorizing the deferral of the income from gift cards
User Rating: 0 / 5
- Details
- Hits: 5257
Research question 2: Revenue procedure authorizing the deferral of the income from gift cards
The revenue procedure authorizing the deferral of income from gift cards is contained in the Revenue Procedure 2013-29, which was a modification of Revenue Procedure 2011-18 (IRS, 2014). The issuance of the new guidance was prompted by the increase in the use of gift cards and many ways that these cards are now being redeemed and sold. It also seeks to provide guidance on accountancy and tax issues related to gift cards.
The main gist of the guidance is to clarify provisions of the old rule. In the old rule (Revenue Procedure 2011-18), it was apparent that the guidance on gift cards applied only to those gift cards redeemable by third parties. This caused confusion in instances where the gift cards were redeemable not by third parties but by other unrelated entities. The new law makes the position clear as it states that the law applies to gift cards redeemable by both the third parties and unrelated entities. In addition, the new rule is relevant not only to those taxpayers who have applicable financial statements but also to those without such applicable financial statements. All payments received but unrecognized by taxpayers in their income statements must be recognized in the subsequent year.